2018 (11) TMI 1808 - AT - Central Excise

Valuation of goods - Rolls for Rolling Mills and the scrap - amalgamation of M/s. B. B. Forging - Revenue was of the view that since the amalgamation has been made effective from 01/04/2001, the clearance of goods made to M/s. B. B. Forging (P) Ltd are required to be valued in terms of Rule 8, right from 01/04/2001 - HELD THAT - The dispute is regarding another unit transfer of certain goods manufactured by the appellant and subsequently, cleared to B. B. Forging (P) Ltd. for the period from 01/04/2001. The Hon ble High Court of Calcutta has approved the scheme of amalgamation of M/s. B. B. Forging (P) Ltd with the appellant through their order dated 28/08/2001. The scheme is effective from 01/04/2001 in terms of Section 4 of the Central Excise Act, 1944 read with Rule 8 of the Valuation Rules, 2000. The valuation of goods cleared from one unit to another belonging to the same manufacture is in the nature of captive consumption and the value is required to made in terms of Rule 8 ibid i.e. @ 115% of the actual production cost, as determined in terms of the CAS-4 standards prescribed. Since the scheme of amalgamation is effective from 01/04/2001, such valuation of goods is required to be adopted with effect from that that. The dispute is essentially for the period 01/04/2001 to 27/08/2001. At the time of clearance of goods, the amalgamation order of the Hon ble High Court was not available to the appellant. Consequentially, the goods were cleared on commercial terms and the same cannot be considered as with quotation Sale within the meaning of Sale of Goods ACT, 1930. As neither of the two entities were aware about the order of the Hon ble Calcutta High Court, which stood passed subsequently only on 28/08/2001 - the commercial transaction between the two parties during the above period, requirement of Section 4 ibid, cannot attract mischief of Rule 8 of Central Excise Valuation goods, 2000. There are no justification in upholding the differential duty demand made by the Lower Appellate Authority - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over valuation of goods post-amalgamation approval by the High Court.

Analysis:
The appellant, engaged in manufacturing rolls for rolling mills, cleared goods to another entity post-amalgamation approval by the High Court. The Revenue demanded differential duty, arguing that valuation as per Rule 8 should be adopted from the effective date of amalgamation, i.e., 01/04/2001. The appellant contended that valuation should commence from the date of High Court approval, i.e., 28/08/2001. The Tribunal noted that the High Court's order made the amalgamation effective from 01/04/2001, requiring valuation under Rule 8 from that date.

The appellant's consultant argued that any duty paid would be available as Cenvat Credit to the other unit, resulting in a revenue-neutral situation. Citing precedents, it was contended that in such cases, no demand for differential duty could be sustained. The Revenue, however, supported the impugned order, emphasizing the High Court's order effective from 01/04/2001. After hearing both sides, the Tribunal examined the records and concluded that the valuation of goods cleared post-amalgamation approval should be as per Rule 8 from 01/04/2001.

The Tribunal highlighted that during the disputed period (01/04/2001 to 27/08/2001), the High Court's amalgamation order was not available to the appellant at the time of goods clearance. As a result, the commercial transactions between the entities could not be considered as falling under the Sale of Goods Act, 1930, due to lack of awareness about the High Court order. Therefore, the Tribunal held that the requirement of Section 4 could not attract Rule 8 of the Central Excise Valuation Rules, 2000 during that period. Consequently, the Tribunal set aside the differential duty demand made by the Lower Appellate Authority and allowed the appellant's appeal, upholding the Order-in-Original dated 13/02/2007.

This judgment clarifies the valuation methodology post-amalgamation approval by the High Court, emphasizing the effective date of amalgamation for determining the valuation of goods cleared between the entities. The Tribunal's decision provides insights into the application of Rule 8 of the Central Excise Valuation Rules, 2000 in cases of amalgamation and the impact of High Court orders on the valuation of goods for excise duty purposes.